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Business groups pleased with tax cut possibility

AM - Friday, 26 August , 2005 08:05:00

Reporter: Brendan Trembath

TONY EASTLEY: For years Australia's largest business groups have been calling on the Federal Government to cut the top tax rate, arguing it would give high-income earners a greater incentive to work even harder.

While the business groups say the Prime Minister's willingness to discuss further cuts is encouraging, they'd like to know just how low he's prepared to go.

Some argue the top rate of tax should be around 30 cents in the dollar, and if it was it would help stem a "brain drain" of skilled workers overseas.

Brendan Trembath reports.

BRENDAN TREMBATH: One of Australia's biggest business groups says cutting the country's top tax rate of 47 cents in the dollar would make Australia a more rewarding place to work, especially for skilled workers such as doctors, lawyers and accountants in demand here and overseas.

Peter Hendy is the Chief Executive of the Australian Chamber of Commerce and Industry, which represents about 350, 000 businesses.

PETER HENDY: One of the issues for Australia is skill shortages right now, and the fact is there's some one million Australians living and working overseas.

They tend to be some of the highest trained, highest skilled Australians there are, and what we want is a proportion, if we can, back, get a proportion of them back to Australia.

So one of the things that has, keeps those people overseas is the high top marginal rates we have in this country.

BRENDAN TREMBATH: Many work overseas for the experience itself. How likely is it that a proportion would come back if the tax rate was lowered?

PETER HENDY: Well, you're right there. The fact is that these people invariably go overseas to extend or expand their life experiences, their work experiences but what we've found, and we've done actual analysis of this issue, is that a lot of those people don't come back to Australia because of our tax system.

BRENDAN TREMBATH: If they pay less tax and potentially spend more, what would be the benefit for the Australian economy?

PETER HENDY: Well it'll strengthen the Australian economy. I mean, in the end the funny thing about this is that there'll be more taxpayer taxes to spend on the important things like roads and law and order and on public hospitals and things like that.

BRENDAN TREMBATH: While the Prime Minister is prepared to entertain the idea of cutting the top tax rate, it's not as popular in the ranks.

The Treasurer Peter Costello, for example, is asked about it often at business breakfasts after he presents his annual budget.

But he's been lukewarm on the idea, saying it would give a tax break to millionaires and billionaires and be seized on by the Opposition.

Peter Hendy from the Australian Chamber of Commerce and Industry concedes cutting the top tax rate is a hard sell.

PETER HENDY: There is a politics of envy issue, and obviously politicians have to be alive to that.

BRENDAN TREMBATH: What's the ideal tax rate for the Australian Chamber of Commerce and Industry?

PETER HENDY: As a top rate we think, over the course of the next 10 years, that we should move to 30 cent top rate, the same level as the corporate rate.

TONY EASTLEY: Peter Hendy from the Australian Chamber of Commerce and Industry.